ZIMRE Holdings Ltd (ZHL) CEO Albert Nduna says the group is now working on the restructuring of its South African reinsurance arm, Southern Union Reinsurance (Sure), currently under curatorship.
“The group will restructure the reinsurance operation in South Africa in liaison with the curator and the Financial Services Board,” Nduna said.
Nduna said two options available for ZHL are to recapitalise the entity through an injection of capital or look for strategic partners.
Nduna said the reinsurance division needed an injection of R100 million to make a major impact on the market.
Nduna said the group had held discussions with three partners willing to inject fresh capital into the loss-making reinsurance entity.
“We held discussions with three players and I cannot disclose their identities at the moment,” Nduna said.
Sure was placed under curatorship in August last year on the grounds of a technical solvency deficit.
Nduna said the group was in constant talks with the regulatory authorities in South Africa. The curatorship of Sure has been extended to June 2. The curator has also applied for the liquidation of another troubled ZHL subsidiary, Southern Union Financial Services (SUFS).
In light of the developments at Sure, its financial statement and that of SUFS were not consolidated in the group’s accounts. ZHL said a provision for the net investment in the entities was made.
In the year ending December 31 2004, ZHL recorded earnings attributed to shareholders of $89,7 billion — a figure twice market capitalisation as of last week. As of Tuesday last week ZHL had a market capitalisation of $38 billion.
Nduna said ZHL was now working on penetrating other regional markets as the group was getting inquiries for partnerships in the region.
The group’s associates in the region performed well in their respective countries with United General Insurance (UGI) rated second-best short-term insurer in Malawi while First Insurance Company (FICO) is highly rated in Uganda.
The insurance businesses were the main driver contributing over 70% of ZHL’s gross revenue.
The reinsurance sector saw its gross premium income firming 170% to $197 billion.
Profit before tax was $90 billion compared to $21 billion in the prior year. ZHL attributed the rise to low claims experienced and branch network expansion.
The contribution to the group’s profitability by the operations in Malawi and Zambia was relatively low but Nduna said Zimre was ranked eighth on the performance roll of reinsurance businesses in Africa.
In the general insurance, profit before tax grew to $36 billion from $14 billion in the year comparable, driven by low claims and improved investment returns.
In the life and pension sector ZHL recorded a profit before tax of $48 billion.
Zimbabwe Insurance Brokers (ZIB) contributed before-tax profit of $4,7 billion to the group in the financial year.
With an asset base of $18 billion, ZIB is the largest capitalised insurance broker in the country and Nduna said although the group had plans to list ZIB on the bourse, the idea had to be driven by the ZIB management and board. ZHL owns 85% equity in the brokerage firm.